US allocates $162 million to microchip technology for semiconductors boost

Microchip Technology: The US Commerce Department has unveiled plans to grant Microchip Technology a staggering $162 million. This initiative aims to enhance the production of semiconductors and microcontroller units (MCUs), crucial components for consumer and defense industries.

The allocated funds will empower Microchip to triple its output of mature-node semiconductor chips and MCUs across two US facilities, addressing a vital need in sectors such as automotive, commercial, industrial, defense, and aerospace.

Commerce Secretary Gina Raimondo expressed the significance of this award, stating, "It is a meaningful step in our efforts to bolster the supply chain for legacy semiconductors that are in everything."

This development unfolds against the backdrop of the United States' strategic move to shift the production of such critical chips away from foreign sources, with a particular focus on reducing dependence on China.

The $162 million award is part of the broader "Chips for America" program, a $52.7 billion initiative approved by Congress in August 2022 to support semiconductor manufacturing and research. The first award under this program was granted to BAE Systems in December, amounting to $35 million for producing chips for fighter planes.

The planned grant to Microchip encompasses $90 million earmarked for expanding a fabrication facility in Colorado and an additional $72 million for a similar expansion in Oregon. This is anticipated to significantly diminish reliance on foreign production, particularly addressing vulnerabilities in global supply chains witnessed during the pandemic.

Lael Brainard, White House National Economic Council director, emphasised the role of these chips in various industries and how the award aims to reduce reliance on global supply chains, which led to price spikes and extended wait times during the pandemic.

Microchip's CEO, Ganesh Moorthy, hailed the award as "a direct investment to strengthen our national and economic security." This comes following Microchip's earlier commitment in 2023 to invest $800 million in tripling semiconductor production at its Oregon facility.

In January, the Commerce Department announced plans to survey US companies on their sourcing of legacy chips, with a specific focus on mitigating national security risks associated with China. Secretary Raimondo anticipates making around a dozen semiconductor chip funding awards in 2024, some potentially running into billions of dollars, with the potential to reshape the landscape of US chip production significantly.

(With Reuters inputs.)